The Last Word On LTCI...
Dog Bones
Ronald R. Hagelman Jr.
August 2013

The current status of the group/multi-life/association market may be best summed up by one of the most famous nursery rhymes, first published in 1805.

 Old Mother Hubbard

 Went to the cupboard

 To fetch her poor dog a bone;

 When she came there,

 The cupboard was bare,

 And so the poor dog had none.

We are down to one mirage of a true group option: Four companies offer multi-life and there are five product options. One company has both a pool of money and a reimbursement alternative.

I’m not really certain what happened. My personal opinion is that timidity, fear and carrier attrition may be involved. What I do know is that we will ultimately have no choice but to deliver this necessary risk abatement at the worksite just as the Affordable Care Act requires employer participation. We deliver acute and sub-acute health care and retirement benefits at the worksite. There is no other way to deliver voluntary supplemental or government-mandated retirement security to the middle class. This is simply not optional. Regardless of your politics or where you draw the lines of private versus public (social) insurance, this will ultimately happen in a payroll deduction or payroll tax environment.

True group alternatives have been around from the beginning. Large group guarantee issue fueled our industry for many years. Frankly it also made many benefit specialists lazy, untrained, unsophisticated and uncaring LTCI order takers.

In addition, large guaranteed issue core benefits issued at very young ages suffered from higher lapses. Much of this protection was also sold with little or no inflation protection, leaving the market open to criticism about “phantom benefits.” Plus, adverse selection is always present when sales are purely voluntary in nature without any prospective underwriting. There is clear evidence publicly expressed by once leading market players that these groups were plagued by serious claims issues. For many years I have made it clear that I was never a fan of that approach. It was flawed at inception and has now tainted the hearts and minds of company decision-makers.

The concept of spreading risk within a reasonably homogeneous affinity group composed of individuals actively at work is still sound! Large company-paid carve-outs have never been the problem. But, in my humble opinion, voluntary guarantee issue was simply born dead.

When you stand up in a boardroom or shop floor and ask, “Who wants to buy LTCI and, oh by the way, there is no underwriting,” I can absolutely promise that every sick and impaired person in the room will line up first. And if you were then to add that the company is paying for this core benefit with optional guaranteed issue buy-ups, you have chiseled your eventual failure in marble as well as committed health care suicide. However, talking about the defunct true group market really is beating a dead horse.

Please also understand that the true group/association/multi-life market was also highly successful from a sales standpoint. Beginning in 2009 the majority of sales had an affinity discount attached. An argument can be made that the inability to raise rates in a timely manner was also a contributing factor in the demise of the large group market. This remains a serious problem for our industry. This is health insurance after all, and when you cannot take action to protect the integrity of a block of premium, it can be extremely frustrating. Economic conditions are also a contributing factor. Since the crash of 2008 and the threat of impending health care mandates, employers have become very reluctant to buy and support “new” benefits.

Multi-life is really all that is left, and very few choices are available—yet the promise of a better deal is constant. There is not a richer benefit with a bigger bang for the buck. It remains the cheapest raise an employer can give: Deductible premiums provide above-the-line deductions, no FICA, no FUTA and no W-2s—how does it get any better than that? Most importantly, there are two promises you can always keep. Premiums will have affinity discounts, those discounts can be offered to family members, only those classes of employees the employer selects will have access to the benefit, and underwriting will be reduced for full-time employees. While it is true that underwriting has tightened up, modified guaranteed issue is still available, but participation thresholds have been increased and employer contribution is becoming a prerequisite. Simplified issue is backed up with prescription screens and Medical Inspection Bureau checks, reserving the right to underwrite. Actively at work spouses can get simplified issue with sufficient participation.

Multi-life works; it spreads risk and enhances participation. I am unaware of any information that suggests that this approach has not been a success.

So why have some discontinued sales? I suppose some companies may not have achieved critical mass with this particular product. Although this lack of success may have had more to do with their product structure, I would also suggest that the concept of accepting some grey underwriting water made folks nervous. The retreat of some companies did drive more premium to the carriers left standing.

As you know, we have just gone through a period in which any risk outside a narrowly defined benefit structure has been discontinued. Advanced pay is basically gone, lifetime benefits is gone, 5 percent compound is priced beyond reach, underwriting is more restrictive and rapidly becoming gender based. I honestly think it was simply a convenient opportunity to unload premium that was problematic at its birth. The remaining carriers’ only problem is too much production. For some, I think multi-life was just too hard and too scary. The market is hanging on and obviously growing for those still accepting business.

Multi-life is the answer—it just needs revision and updating—but it will survive. Maybe the next two verses of Old  Mother Hubbard can be illuminating:

 She went to the baker’s

 To buy him some bread;

 When she came back,

 The dog was dead!

 She went to the undertaker’s

 To buy him a coffin;

 When she came back

 The dog was laughing.

Other than that I have no opinion on the subject. 

Author's Bio
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: Website:

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